20161129-招商证券_香港_-Oil_and_Gas__Worst_is_over__Eyes_on_moderate_recovery_in_2017E_37页_5mb_5mb

报告摘要

Summary of China Merchants Securities (HK) Oil and Gas Industry Report - 2017E

Core Content

The China Merchants Securities (HK) report highlights a positive outlook for the oil and gas sector in 2017E, driven by a moderate recovery in oil prices and increased capital expenditures (capex) across the industry. The report upgrades the sector from NEUTRAL to OVERWEIGHT, emphasizing the potential for recovery and growth.

Key Views

Oil Price Recovery: The report forecasts oil prices to recover in 2017E, trading in a range of $50–60/bbl. The low end is supported by a slowdown in OPEC supply, while the high end is capped by US shale breakeven prices. The average oil price is estimated at $55/bbl, which is $4–5/bbl higher than the EIA's projection.
Long-term Oil Price Outlook: The long-term oil price projection remains at $75/bbl, as higher prices are needed for the development of new oil discoveries.
Upstream Capex Recovery: Global integrated oil companies are expected to increase capex by an average of 7% YoY in 2017E, while independent E&Ps in North America may see a 26% YoY increase. Domestic upstream capex is expected to rise by 10–15% YoY in 2017E, driven by the recovery in oil prices above the breakeven threshold of $40–48/bbl.
Sector Upgrade: The oil and gas sector is upgraded from NEUTRAL to OVERWEIGHT, with a preference for oil price recovery players like CNOOC and SSC, and a positive outlook on Sinopec Kantons due to volume growth.
Domestic Gas Price Reform: The NDRC has introduced a new transmission tariff pricing mechanism for long-distance gas pipelines, aiming to lower energy prices for end users. The report estimates a potential RMB0.6/cu.m cut in gas prices, with upstream players, pipeline operators, and distributors collectively contributing up to RMB23.7bn in cost savings.

Investment Highlights

Company Ratings and Projections

Company	Ticker	Rating	Current Price (HK$)	Target Price (HK$)	Upside	FY16E EPS (RMB)	FY17E EPS (RMB)	FY16E P/E	FY17E P/E	FY16E P/B	FY17E P/B	FY16E ROE	FY17E ROE
CNOOC	883 HK	BUY	10.04	12.80	27%	0.03	0.59	n/a	14.5	1.0	1.0	0.4	7.0
Sinopec Kantons*	934 HK	BUY	3.48	4.90	41%	0.43	0.46	8.1	7.5	0.8	0.8	10.8	10.7
SSC	1033 HK	BUY	1.59	1.90	19%	(0.61)	0.03	n/a	42.4	1.2	1.2	(42.7)	2.8
COSL	2883 HK	SELL	7.42	6.20	-16%	(2.11)	(0.07)	n/a	n/a	0.8	0.8	(24.2)	(0.9)

*EPS in HK$

Sector Outlook

CNOOC: Expected to show a strong earnings turnaround, with RMB26.3bn in 2017E compared to RMB1.4bn in 2016E. It is attractive at a P/B of 1.0x, below its historical average and global peers.
SSC: Benefiting from upstream capex rebound, with a 96% market share in the drilling segment. Its A-share option scheme is expected to improve management efficiency and performance. Attractive at a P/B of 1.2x.
Sinopec Kantons: Expected to benefit from volume growth in crude oil imports, with a P/E of 7.5x and P/B of 0.8x in 2017E, both at discounts to 2016 levels.
COSL: Maintains a SELL rating due to continued headwinds in the offshore drilling market, with a P/B of 0.8x, higher than its global peers.

Global Oil Market Analysis

OPEC Supply Curb: OPEC production has slowed, with spare capacity at a 12-year low. The report suggests that the worst is over for the oil market, as OPEC's ability to increase production is limited.
US Shale: Breakeven prices for US shale producers have dropped significantly due to cost reductions and improved well performance. However, long-term supply may be capped by higher oil prices.
Russia: Tax reforms and increased dividend payouts may limit future investment and production growth. Russia's oil supply is expected to peak in 2017 and decline thereafter.

Demand and Capex Trends

China's Oil Demand: China's robust growth in oil consumption, driven by both inventory build-up and teapot refineries, is a key driver of global oil demand. The report forecasts a 7% CAGR in China's crude oil imports from 2015 to 2020.
Global Capex Recovery: While 21 leading integrated oil companies are expected to see a 2% decline in total capex, 15 with a combined market cap of $1tn are expected to increase capex by 7% YoY in 2017E.
Deepwater Drilling: The deepwater drilling market remains weak, with contracted semi-sub rigs down 54% from 2013 levels and utilization at 52%. Jack-up rigs are also down 27% from 2014, with utilization at 54%.

Conclusion

The report concludes that the worst is over for the China oil and gas sector, with a moderate recovery in oil prices expected to drive capex and earnings growth. The focus is on companies that benefit from this recovery, such as CNOOC, SSC, and Sinopec Kantons, while COSL faces continued challenges. The global oil market is expected to improve due to OPEC supply curbs and China's strong demand, but the deepwater drilling market and US shale remain sensitive to price fluctuations and cost structures.

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